The Hatchery is in the mindset-shifting business. We empower people to move from static to growth mindsets. From perfectionism to iterative improvement. From analysis paralysis to learning by doing. A big shift we help people make is the shift from inventor to institution builder. Many of the founders we work with are hyper-focused on their product. We expand their awareness to the infrastructure they will need to build to predictably and repeatedly get their product into the hands of the people it’s meant to help. Really successful innovators need to go even further. Truly successful innovations create entire ecosystems around their products and services. Multiple stakeholders converge and interact around really valuable innovations. This means innovators are gardeners. They cultivate whole ecosystems. In this edition of “Timely Innovations” we are going to evaluate some ecosystem stewards and see if any of them have the green thumb.
Can Google Tend the Garden?
We are going to start with one of the biggest ecosystem builders of all: Google. Depending on how you look at it, Google is either creating a massive disruption in their core business of search, or having their core business of search disrupted. Either way, people are big mad about Google’s search results quality. Here’s the thing,
they always have been, “Almost as soon as Google took over, a secondary market emerged for links... It was easy: buy links that led to your site and watch your ranking in Google’s results rise... People doing SEO find loopholes in the algorithm; critics complain about search results; search engines innovate and close the loopholes… the rise of SEO had reached a breaking point multiple times. In 2003, as Google approached the deadline to disclose pertinent business information leading up to its IPO, the company quietly released an update cracking down. By 2011, SEO was once again oppressively pervasive… In the next year, Google made two major changes to the algorithm.” Interestingly,
Google’s co-founders saw this problem way back in 1997 when Google was still a research project, “we expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.” Google has been tending this garden of advertisers, publishers, and searchers for decades. LLM’s (and the companies that run them) are a new species that Google has to integrate such that their desires being met doesn’t undermine the entire garden.
When the Ecosystem Outgrows the Product
Let’s look at another truly massive ecosystem: automobiles. If you look past the literal car you see a sprawling, interconnected network of manufacturers, shippers, dealers, repairers, owners, re-sellers, parts manufacturers, etc. It is a testament to the car’s success that such a robust ecosystem has grown around it. Interestingly, the moneymakers in that ecosystem are
not the car itself, “The vehicle itself is now the least profitable part of the automotive business. Dealers now make nearly as much money arranging your financing as they do selling you the car. The way they make it is by marking up the interest rate the lender already quoted them. The average loan has doubled in length since 1971… Service and parts are now the most profitable department in the dealership.” This is partly because car manufacturers have gotten incredibly efficient at making cars. If a car company made a 1980’s car today, it would
cost 45% of what it cost in 1980. They just don’t make that car anymore. This has perhaps made car companies in Europe incredibly vulnerable to the Chinese car manufacturers who are eating their lunch by making incredibly low-cost cars (which these companies just don’t really do anymore). It also flies in the face of one of the key players in the automobile’s stories guiding principles. Henry Ford had the foresight to make cars extremely cheap and accessible. Perhaps cars have gotten too far from their (pardon the pun) roots.
Can AI Cultivate Its Next Audience?
We are going to conclude with a nascent ecosystem being built around the technology of LLM’s and AI video generation. Something strange
is happening with this new technology — “younger adults have become increasingly skeptical of AI. Those aged 18 to 29 (which includes Gen Z) are the most likely to view businesses’ use of AI to create advertisements negatively. Two-thirds (66%) in this age group express negative views, compared with 51% of adults aged 30 to 44, 38% of those aged 45 to 59 and 46% of those aged 60 and older. Young adults are also notably less accepting than older Americans of all uses of AI in advertising. In fact, 73% of 18- to 29-year-olds say it’s unacceptable for businesses to use AI to create people or voices in ads — by far the highest of any age group.” This is not the stereotypical pathway for a new technology. We are used to new tech being carried in its beginnings by youthful early adopters. Here again, thinking about this as an ecosystem is helpful. It’s entirely possible that what happens is young creators make content for older audiences at the beginning. But gardens are not static things. If creators aren’t able to cultivate an audience in the future, then they have no future.
